"Among them is Jim Leach, a Republican former representative from Iowa, who began arguing two decades ago in Congress that the government-chartered mortgage companies, Fannie Mae and Freddie Mac, were unfairly insulated from the real world.

They were not subject to the same financial standards and tax burdens as their competitors, he warned, and if they ran into trouble, an implicit government guarantee to back them up meant taxpayers would be left with the losses.

“There are times in public policy making that one can feel like Don Quixote,” Mr. Leach said of his repeated legislative battles to rein in the two companies’ growth.

Congress established Fannie Mae during the New Deal to make homes more affordable for lower- and middle-income Americans, and Freddie Mac was established later with a similar purpose. Neither provides home loans. Instead, the companies buy mortgages from banks and take on the risks of possible defaults — allowing banks to make even more mortgages.

Too often, over the last quarter century, wehave lost this sense of shared prosperity. And this has not happened byaccident. It’s because of decisions made in boardrooms, on trading floors andin Washington.We failed to guard against practices that all too often rewarded financialmanipulation instead of productivity and sound business practices. We let thespecial interests put their thumbs on the economic scales. The result has beena distorted market that creates bubbles instead of steady, sustainable growth;a market that favors Wall Street over Main Street, but ends up hurting both."

Analysis

Obama is completely right here, but he doesn't even know it.  Yes, the free market has caused our prosperity.  At no point was the government responsible for that prosperity.  The only credit the government can take is that it didn't impede the progress of the free market too much, which allowed it to grow and Americans to prosper.  He is absolutely wrong that the American government guided the invisible hand of the market.  It is called an invisible hand because no one can guide it or ever understand every aspect of it.  In fact, we are still learning about it today.  This is simply ignorance on Obama's part.  

How many more rules do we need in the anything but free market we have?  We know the rules don't work, because we've had rules forever and the market still runs into crises despite the "common-sense" regulations proffered by naive politicians like Obama.  The rules caused the problems of Fannie Mae and Freddie Mac.  It was not a lack of rules that caused this debacle, but rather the rules themselves.  

Special interests caused these problems as well.  Both candidates for the Presidency have taken money from these "private" organizations.  Obama took the second most contributions from Fannie Mae, Freddie Mac, and Lehman Brothers.  So, to call them corrupt when Obama himself was corrupt with them is beyond disingenuous.  It's an outright lie.  Obama is right that these special interests distorted the market, but it was government special interests not free market interests.  It is not in the interest of the free market for such businesses to remain.  The only way they can survive is with government protection, which is why they will still survive.

Obama then mentions "shared" prosperity.  What is that but a call for sharing wealth?  

Mantra: If Obama doesn't favor free market solutions and is not a socialist, what is he?

Part III

Obama:  "To get outof this crisis – and to ensure that we are not doomed to repeat a cycle ofbubble and bust again and again – we must take immediate measures to createjobs and continue to address the housing crisis; we must build a 21st centuryregulatory framework, and we must pursue a bold opportunity agenda that createsnew jobs and grows the American economy."

Analysis

First, is the 21st century regulatory framework just going to replace the 20th century regulatory framework that caused this crisis in the first place?  Why would we trust the same government which already had oversight to watch over these businesses now?  What will stop corrupt Democrats and Republicans from making the same shady deals again in the interests of crony capitalism?

Second, the government does not create jobs.  It merely prevents the free market from creating those same jobs by stealing money from taxpayers, who are entrepreneurs.  As John Stossel points out:

Politicians always promise that their programs will create jobs. It's used to justify building palatial sports stadiums for wealthy team owners. Alaska Rep. Don Young claimed the infamous "bridge to nowhere" would create jobs (http://tinyurl.com/6jq623). The fallacy is the same in every case: Even if the program creates jobs building bridges or windmills, it necessarily prevents other jobs from being created. This is because government spending merely diverts money from private projects to government projects.

Governments create no wealth. They only move it around while taking a cut for their trouble. So any jobs created over here come at the expense of jobs that would have been created over there. Overlooking this fact is known as the broken-window fallacy (http://tinyurl.com/ydasa2). The French economist Frederic Bastiat pointed out that a broken shop window will create work for a glassmaker, but that work comes only at the expense of the cook or tailor the shopkeeper would have patronized if he didn't have to replace the window.

Creating jobs is not difficult for government officials. Pharaohs created thousands of jobs by building pyramids. Our government could create jobs by paying people to dig holes and then fill them up. Would actual wealth be created? Of course not. It would be destroyed. It's like arguing the hurricanes create jobs. After all, the destruction is followed by rebuilding. But does anyone seriously believe that replacing destroyed buildings creates wealth?